A coalition of 13 state attorneys general yesterday announced they had filed a lawsuit against non-bank installment lender OneMain Financial, accusing the company of misleading borrowers and inflating loan costs by adding insurance policies and other products to loans without consumers’ knowledge. The case, filed in federal court in New York, alleges the company’s practices saddled tens of thousands of borrowers with hundreds of millions of dollars in additional costs.
The lawsuit was led by the New York attorney general and joined by officials from Colorado, Maryland, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, South Dakota, Virginia, Washington, and Wisconsin. The coalition claims OneMain engaged in deceptive practices by steering borrowers into purchasing optional add-on products such as credit insurance and membership programs while misrepresenting whether those products were required and how much they would ultimately cost.
According to the complaint, OneMain markets installment loans as having “clear, upfront terms,” but then increases the cost of those loans by bundling in optional products that many borrowers either did not understand or did not knowingly purchase.
Among the allegations:
- Borrowers were sold credit insurance policies that purportedly pay off loans if the borrower dies, becomes disabled, or loses employment.
- Additional products, including home or auto membership programs similar to AAA, were often included in the loans.
- The full cost of these products, including interest when financed as part of the loan balance, was allegedly not clearly disclosed to borrowers.
- Some borrowers were rushed through loan closings or pressured into accepting add-on products during the closing process.
The complaint also alleges that many of these products were financed upfront as “single premium” add-ons, meaning the entire cost was rolled into the loan principal, increasing both the balance and the interest consumers ultimately paid.
The suit is asking for a wide range of remedies, including:
- Restitution for borrowers who paid for the add-on products
- Civil penalties and disgorgement of profits
- A court order preventing the company from continuing the alleged practices
- Removal of negative credit reporting tied to the disputed loan products
- An end to collection actions related to those add-ons
OneMain Financial strongly rejected the allegations and says it plans to fight the case in court.
“The states’ allegations are simply untrue — their case is wrong on the facts and wrong on the law,” the company said in a statement, adding that the issues raised were already reviewed in a prior Consumer Financial Protection Bureau investigation.
The company emphasized that it provides “responsible and much needed access to credit for hardworking Americans” and said the lawsuit will not change how it operates.
